Bitcoin (BTC) crashed by $9,000 in hours on Tuesday due to a mass unwinding of leveraged merchants and debtors, one analyst believes.

In a sequence of tweets on Wednesday, Willy Woo sought to unravel what made BTC/USD dive to lows of $42,800 on Tuesday.

Woo: Bitcoin margin debtors and open curiosity could also be accountable

With rumors flying over who was behind Bitcoin’s main worth dip, analysts have been crunching data to be able to perceive the place the rout started.

Analogies to the March 2020 crash, sparked by coronavirus measures, abound, however Tuesday’s occasion confirmed main variations, Woo stated.

“Leverage markets sold off but investor buying just got stronger,” he summarized.

“BTC flash crashes are caused by deleveraging, the COVID crash was similar in that derivatives overreacted, but back then it was supported by investors. This one was completely divergent and a mystery. Cheap coins.”

Woo subsequently suspected that the dip came as a result of margin borrowing and open interest. In a classic domino effect, positions unwound to produce a “cascade” of liquidations and a positive feedback loop, which severely impacted spot price.

“Healthy cleansing”

While the processes concerned could also be difficult for the typical observer, the energy of Bitcoin’s rebound and ongoing investor buy-ins recommend that chilly toes amongst hodlers weren’t concerned within the occasion.

Related: Bitcoin’s sharp fall from $50K linked to stronger US dollar, gold correlation shows

According to on-chain monitoring useful resource Whalemap, large-volume traders who had been newcomers to the market offered the overwhelming majority of sell-side strain.

“So yesterday we had a sell off. The move was quite violent and large volumes of Bitcoin were being sold off on spot markets, researchers tweeted alongside a chart showing where those parties had acquired BTC.

“But who was selling? Not HODLers. Mostly whales and in fact the ones that bought their btc only quite recently.”

Bitcoin whale outflows annotated chart. Source: Whalemap/Twitter

For fellow analyst William Clemente, in the meantime, Tuesday offered a welcome reset of frothy derivatives markets.

“Investor activity strengthening + Leveraged speculators wiped = healthy cleansing,” he concluded alongside Woo’s findings.